Dell Buyout: Good News For SMB Customers?

Michael Dell said a private Dell is a "great outcome" for users -- but that doesn't make it true. Here's how Dell could turn that rhetoric into reality for SMBs.

Michael Dell hailed his victorious bid to take his company private as "a great outcome for our customers." Just saying it, however, doesn't instantly make it so.

A key force behind the theory is that a private Dell can make the decisions it feels are best for its customers -- and ultimately the company -- without worrying about its next quarterly earnings call with investors and financial analysts. That's a luxury most other tech behemoths -- Microsoft comes to mind these days -- don't enjoy.

Techaisle analyst Anurag Agrawal said in an email interview that Dell going private won't have any automatic impacts for customers, good or bad. But he sees a big opportunity for the firm in becoming a one-stop IT shop for a greater number of business customers while simultaneously continuing to invest in its hardware business, PCs included. Agrawal noted that Dell's two-year spree of acquisitions has helped it make inroads as an "end-to-end" IT provider for large enterprises. It faces stiff competition there from entrenched players like IBM and HP, though, at the same time that its consumer PC business has suffered from stagnant sales.

According to Agrawal, a private Dell, one that doesn't deal with the downsides of being a publicly held concern, would do well to extend its end-to-end services strategy to the small and midsize business (SMB) market.

"Although Dell is making good inroads into the enterprise segment, specifically within healthcare, SMBs could be a good target market," Agrawal said. "HP is still strong with SMBs, but there are too many players targeting the market segment. Dell will have a lot to do in this area."

Indeed, it won't be easy. While Dell's PCs have long been a popular choice for U.S. SMBs, the relatively new services side of the business has far less traction. Among other reasons: Plenty of SMBs probably don't know those services even exist.

There's a glaring place to start fixing that problem, according to Agrawal: Dell.com. "If one visits Dell's website there is no separate section for SMBs," he said. "And our research shows that SMBs' first point of [IT] knowledge-gathering is through vendor websites. Typing in SMB in their search box brings up a list of servers. That is not enough."

The buyout deal could have negative effects, too, fostering skepticism among certain customers as a result of the decreased transparency inherent in a private corporation. "[Dell will need to] earn [the] trust of the SMB customer through a direct dialogue and conversations through its SMB-focused channel partners," Agrawal said.

The upside for a wide range of SMBs is the virtual CIO scenario, where Dell becomes a one-stop IT shop for SMBs burdened with technology headaches. "Technology pain points have now overtaken business pain points for SMBs, and Dell has to work towards becoming a trusted adviser," Agrawal said. There is a relative smattering of SMBs today with that kind of a relationship with Dell. Agrawal mentioned a research interview with one SMB exec who called Dell her "CIO in a box," and he added that her firm isn't alone. But many SMBs still view Dell mainly as a hardware provider. Agrawal noted eight critical areas where SMBs need help soothing those aforementioned pain points: Cloud, virtualization, managed services, collaboration, analytics, backup and disaster recovery, and security.

"[After] going private, if they really invest in building [those] solution areas that solve [pain] points, then it will be good for Dell and better for the industry. With privatization, Dell has a rare opportunity to build products and solutions from which customers can capture value," Agrawal said. "Right now, the message is not clear."

His primary concern is that the now-private Dell will place too much emphasis on PCs, tablets and other devices. Combined with a lack of communication with SMBs, that could kill the virtual CIO scenario.

After the shareholder vote, Michael Dell talked about delivering new technologies (big data, cloud, etc) at low cost, just like the company used to do with PCs. I take this to mean it will focus on bringing SMBs the kind of products that IBM and HP are bringing to bigger customers; that is, Dell will work from the middle out, just as it has been doing for a while.

The midmarket has the most customers, but as Kevin alluded in the article, there's a problem: Dell will have trouble selling SMBs on some of this stuff, and Dell will be stuck with really low margins (if not losses) from many of its businesses. If Michael Dell has been waiting for the last year to break free from Wall Street, then perhaps he has a plan ready to go. Even with the PC market unraveling, the company has done a lot to redefine its portfolio, and I don't see why Michael Dell would invest so much of his own money if he didn't have an even more dramatic transformation envisioned. But Dell's recent quarterly reports also speak for themselves. Dell will have to convince some skeptics, as several of the comments in this thread demonstrate.

I agree, Dell's biggest problems are their shoddy product and service quality. I work with Dells on a daily basis and they are constantly dropping like flies. A lot of my time is spent on exchanges, transferring user data, and a lot of paper work. I think everyone would be willing to spend a few bucks more per device to get better quality...if it wasn't that Dell is already ridiculously overpriced.I can build better systems myself for half the price of what Dell asks for and the warranty is at times even better. But nobody gets fired for buying Dell.

So no more quarterly reports and poof all Dell's problems are fixed. I don't think so. Wall street reporting has nothing to do with business strategy and execution. Dell is no longer an innovator like Apple or Samsung. At one time you could count on Dell to be first on the market with the latest Intel technology, now Dell lags. Dell is no longer inexpensive like Asus or Acer. At one time you could count on Dell to deliver the latest technology at the lowest cost because of lower overhead costs via direct online sales verses retail distribution. In many cases Dell prices are now more than retail. Dell no longer provides products/solutions customizable by customers. Since moving manufacturing to China customizations are limited. Basically all the advantages once propelling Dell are now gone. Going private ain't go'na fix that.

Just because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.